The High Health Costs of the TPP’s “Free Trade”

Excerpted from part 5 of a series on the Trans Pacific Partnership by Joseph Stiglitz published 3/28/16 by the Roosevelt Institute:

“Despite protests from industry lobbyists who are upset that they did not get everything they wanted, big pharmaceutical companies are some of the biggest winners in the Trans-Pacific Partnership (TPP). This supposed “free trade” agreement between the United States and 11 countries in the Americas and Asia would enshrine expansive monopoly protections for intellectual properties that shield drug makers from competition and provide them with new powers to challenge government decisions aimed at managing health care costs.

“A win for Big Pharma here will leave virtually everyone else worse off, with their higher profits coming at the expense of higher health care costs for consumers and taxpayers, avoidable deaths and suffering, and health innovations being brought to market at a slower pace.”

In order to maximize public welfare, intellectual property rights (IPRs) must strike a balance between providing incentives for innovation and enabling their widespread dissemination so people can benefit from and build on new ideas and technologies. Since past knowledge is the most important input to the production of new ideas, more restrictive IPRs actually restrain opportunities for future innovation. Patents are part of innovation systems in all countries; however, both recent and historical economic evidence shows that patents with varying degrees of strength have little relationship to measures of innovation, investment, or economic performance. In other words, patents are not the only way to incentivize research and development.

Nowhere is it more imperative to get the IPR balance right than in the health care field. The 1984 Hatch-Waxman act struck the right balance, saving U.S. consumers, employers, and taxpayers more than $100 billion per year with lower-cost generic medicines. Since then, pharmaceutical firms have developed new policy devices to claw back their monopoly protections and are advancing these policies in trade agreements. TPP would lock these in place in the U.S. and export them to other countries, tipping the IPR balance for all TPP partners as well as countries outside the bloc. … [See the full post]